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Salient Features of FCRA

Pravin Gupta CS 
on 15 March 2013

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FOREIGN CONTRIBUTION REGULATIONS

The Foreign Contribution (Regulation) Act, 2010 has come into effect from May 1, 2011. The Foreign Contribution Regulation Act has come into force under which no political party can receive foreign funds as donation and which will facilitate regulation of foreign contributions and hospitality by individuals and organizations.

The Act is aimed at consolidating the law to regulate the acceptance and utilization of foreign contribution or foreign hospitality by certain individuals or associations or companies.

The banks also have been brought under the ambit of the act and every bank or Authorized person in foreign exchange shall report to such authority prescribed amount of foreign remittance and the source and manner in which the foreign remittance was received.

Any organizations receiving funds over Rs10 lakh, the bank will immediately inform the government to enable the agencies to "track" the funds.

What is Foreign Contribution?

Foreign contribution means the donation, delivery or transfer, made by any foreign source of any, 

a) Article, not given to a person as a gift for personal use, if the market value, in India, of such article exceeds one thousand rupees; 

b) Currency, whether Indian or foreign; or, 

c) Foreign security 

This excludes earnings from foreign client(s) by an NGO/association in lieu of goods sold or services rendered by it as this is a transaction of commercial nature.

Foreign Source: includes the government of any foreign country or territory or its agency; an international agency; a foreign company; and citizen of a foreign country.

Agencies of the United Nations, World Bank and some other International agencies/multilateral organizations are exempted from the definition of ‘foreign source'.

*Contributions made by a citizen of India living in another country (i.e. Non-Resident Indian), from his personal savings, through the normal banking channels, is not treated as foreign contribution.

Foreign contribution cannot be accepted by: 

(i) a candidate for election; 

(ii) Correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper; 

(iii) Judge, government servant or employee of any Corporation; 

(iv) Member of any legislature; 

(v) Political party or office bearer thereof; and 

(vi)  Any organization of a political nature and any association or company engaged in the production and broadcast of audio or audio visual news or current affairs program have been placed in the category prohibited to accept foreign contribution (Included in FCRA,2010).

The FCRA 2010 does not apply in the following cases:

(a) contribution from any foreign source towards  scholarships or stipends 
(b) receipts in the ordinary course of business, trade or commerce 
(c) consideration for goods or services 
(d) receipt of any foreign contribution by an individual from relatives  
(e) receipt of gifts from any foreign source for personal use provided the market value of such gift does not exceed INR 25,000.

As per the FCR Rules, no approval is required in the event foreign contribution is received from a relative. However, in case the foreign contribution from a relative exceeds INR 1,00,000 in a financial year, the recipient is required to inform the Central Government within 30 days of receipt.       

Salient Features of the Act and Rules thereof-

a. Any association granted prior permission or registered with the Central Government under Section 6 or under the repealed FCRA, 1976, shall be deemed to have been granted prior permission or registered, as the case may be, under FCRA, 2010 and such registration shall be valid for a period of five years from the date on which the new Act has come into force.

b. While the provisions of the repealed FCRA, 1976 have generally been retained, the FCRA, 2010 is an improvement over the repealed Act as more stringent provisions have been made in order to prevent mis-utilisation or illegal use of the contribution received by the associations.

c. provisions have been made for suspension as well as cancellation of registration granted for violation of the provisions of the Act. Such provisions did not exist in the repealed Act.

d. New provision has also been made for management of foreign contribution and assets created out of such contribution of persons whose certificates have been cancelled.

e. No funds other than foreign contribution shall be deposited in the FC account to be separately maintained by the associations etc. Every bank shall report to such authority, as may be prescribed, the amount of foreign remittance received, sources and manner and other particulars.

f. A provision has been introduced to the effect that the assets of any person who has become defunct shall be disposed of in such manner as may be, specified by the Central Government.

g. A provision has been introduced to the effect that any person, who knowingly gives false intimation and seeks prior permission or registration by means of fraud, false representation or concealment of material fact, shall, on conviction by Court, would be liable to imprisonment for a term which may extend to six months or fine or with both.

h. Any person contravening the provisions of the Act shall be punishable with imprisonment for a term which may extend to five years or with fine or with both.

i. Every person who receives foreign contribution under the Act shall submit a report, duly certified by a chartered accountant, in the prescribed Form, accompanied by an income and expenditure statement, receipt and payment account, and balance sheet for every financial year beginning on the 1st day of April within nine months of the closure of the financial year,  

j. Every such return in shall also be accompanied by a copy of a statement of account from the bank where the exclusive foreign contribution account is maintained by the person, duly certified by an officer of such bank. The accounting statements referred to above shall be preserved by the person for a period of six years. A ‘NIL’ report shall be furnished even if no foreign contribution is received during a financial year. 

FOR NON- Governmental Organizations (NGOs)

a. Annual returns to be filed by NGOs on foreign fund receipts and expense

b. Apply for renewal every five years

c. Cancellation if returns not fled

d. NGOs against national interest not eligible for foreign funds

FCRA 2010 provides for stringent compliance requirements to be observed by the recipients of foreign contribution. While the provisions pertaining to transfer of foreign contribution and compounding of offences are welcome changes for the recipients of such contribution, restriction on utilization for administrative purposes shall aid in ensuring that the funds are utilized for the purpose for which they were received.     

PRAVIN GUPTA, ASSISTANT EDUCATION OFFICER, ICSI


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